{ "id": 11656359, "name": "NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellant v. JAMES DEMPSEY and REGIONAL ACCEPTANCE CORPORATION, Defendant-Appellees", "name_abbreviation": "Nationwide Mutual Insurance v. Dempsey", "decision_date": "1998-02-17", "docket_number": "No. COA97-159", "first_page": "641", "last_page": "645", "citations": [ { "type": "official", "cite": "128 N.C. App. 641" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "621 N.E.2d 875", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1993, "pin_cites": [ { "page": "876" } ], "opinion_index": 0 }, { "cite": "486 N.W.2d 600", "category": "reporters:state_regional", "reporter": "N.W.2d", "year": 1992, "opinion_index": 0 }, { "cite": "64 S.E.2d 162", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1951, "pin_cites": [ { "page": "165" }, { "page": "165" }, { "page": "166" } ], "opinion_index": 0 }, { "cite": "233 N.C. 321", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8606740 ], "weight": 2, "year": 1951, "pin_cites": [ { "page": "325" }, { "page": "325" } ], "opinion_index": 0, "case_paths": [ "/nc/233/0321-01" ] }, { "cite": "146 S.E.2d 410", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1966, "pin_cites": [ { "page": "416" }, { "page": "448-49" } ], "opinion_index": 0 }, { "cite": "266 N.C. 430", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561069 ], "year": 1966, "pin_cites": [ { "page": "438" } ], "opinion_index": 0, "case_paths": [ "/nc/266/0430-01" ] }, { "cite": "350 S.E.2d 66", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1986, "pin_cites": [ { "page": "68" } ], "opinion_index": 0 }, { "cite": "318 N.C. 534", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4732740 ], "year": 1986, "pin_cites": [ { "page": "538" } ], "opinion_index": 0, "case_paths": [ "/nc/318/0534-01" ] }, { "cite": "491 S.E.2d 656", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 1997, "pin_cites": [ { "page": "658", "parenthetical": "citing State Capital Ins. Co. v. Nationwide Mutual Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66, 68 (1986)" }, { "page": "660" }, { "page": "660" }, { "page": "658" } ], "opinion_index": 0 }, { "cite": "127 N.C. App. 442", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11797328 ], "weight": 3, "year": 1997, "pin_cites": [ { "page": "446", "parenthetical": "citing State Capital Ins. Co. v. Nationwide Mutual Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66, 68 (1986)" }, { "page": "448" }, { "page": "446" } ], "opinion_index": 0, "case_paths": [ "/nc-app/127/0442-01" ] } ], "analysis": { "cardinality": 460, "char_count": 9389, "ocr_confidence": 0.759, "pagerank": { "raw": 2.8450629113309957e-07, "percentile": 0.84022601317683 }, "sha256": "93f609c0a795c9f52e776e92006f219e8f2da6b850097e5b7783653d15bea1cb", "simhash": "1:223c636ae13a8e09", "word_count": 1497 }, "last_updated": "2023-07-14T19:05:25.972365+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Chief Judge ARNOLD and GREENE concur." ], "parties": [ "NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellant v. JAMES DEMPSEY and REGIONAL ACCEPTANCE CORPORATION, Defendant-Appellees" ], "opinions": [ { "text": "McGEE, Judge.\nNationwide filed a declaratory judgment action on 21 July 1995 to determine its liability to James Dempsey, the insured owner of a 1988 Chevrolet pickup truck destroyed by fire, and to Regional Acceptance Corporation (Regional), which held a properly perfected security interest in the vehicle and was named as the \u201closs payee\u201d on Nationwide\u2019s automobile policy. In its declaratory judgment action, Nationwide alleged that it was not obligated to Dempsey for any insurance proceeds because he intentionally set the truck on fire. Nationwide further alleged that it owed nothing to Regional under the loss payable clause attached to the insurance policy because the intentional burning of the truck constituted a \u201cconversion or secretion\u201d of the covered vehicle which is excluded under the coverage provided to Regional under the loss payable clause. James Dempsey did not file an answer and an entry of default was made by the Clerk of Court on 19 April 1996. Both Nationwide and Regional filed motions for summary judgment. After conducting a hearing, the trial court granted summary judgment in favor of Regional and denied summary judgment for Nationwide in an order entered 22 November 1996. Nationwide appeals from this order.\nThis appeal involves the interpretation of the language contained in the loss payable clause which provides:\nLoss or damage under this policy shall be paid as interest may appear to you and the loss payee shown in the Declarations. This insurance covering the interest of the loss payee shall become invalid only because of your conversion or secretion of your covered auto. However, we reserve the right to cancel the policy as permitted by policy terms and the cancellation shall terminate this agreement as to the loss payee\u2019s interest. We will give the loss payee 10 days notice of cancellation.\nThe issues are: (1) whether the loss payable clause contained in the insurance contract is a standard mortgage clause insuring the mortgagee\u2019s interest in the vehicle from intentional destruction by the insured, and (2) whether the exclusion under the clause applies to bar Regional\u2019s claim against Nationwide under the policy.\nProvisions in insurance contracts excluding coverage \u201care not favored and will be construed against the insurer if ambiguous.\u201d N.C. Farm Bureau Mut. Ins. Co. v. Briley, 127 N.C. App. 442, 446, 491 S.E.2d 656, 658 (1997) (citing State Capital Ins. Co. v. Nationwide Mutual Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66, 68 (1986)). Thus, \u201cthe burden is on the insurance company to set forth clearly and unambiguously\u201d definitions \u201cthat eliminate[] guesswork on the part of its insured.\u201d Id. In the absence of such express definitions of terms in contracts of insurance, they should be interpreted according to their daily usage. N.C. Farm Bureau Mut. Ins. Co., 127 N.C. App. at 448, 491 S.E.2d at 660 (quoting Insurance Co. v. Insurance. Co., 266 N.C. 430, 438, 146 S.E.2d 410, 416 (1966)). Thus, \u201cstandard, nonlegal dictionaries may be a more reliable guide to the construction of an insurance contract than definitions found in law dictionaries.\u201d Id. at 448-49, 491 S.E.2d at 660.\nThere are two types of mortgagee clauses. Green v. Insurance Co., 233 N.C. 321, 325, 64 S.E.2d 162, 165 (1951). The first, typically referred to as a \u201cstandard or union mortgage clause,\u201d stipulates that \u201cthe interest of the mortgagee in the proceeds of the policy shall not be invalidated by any act or neglect of the mortgagor.\u201d Id. This type of clause acts as a distinct and independent contract between the insurance company and the mortgagee and \u201cconfer[s] greater coverage to the lienholder than the insured has in the underlying policy.\u201d Foremost Ins. Co. v. Allstate Ins. Co., 486 N.W.2d 600, 605 fn. 27 (Mich. 1992).\nThe second type of mortgagee clause is the \u201copen or simple loss-payable clause, which merely provides that the loss, if any, shall be payable to the mortgagee, as his interest may appear.\u201d Green, 233 N.C. at 325, 64 S.E.2d at 165. In other words, the \u201crights of the mortgagee under [this type of] clause are wholly derivative, and cannot exceed those of the [insured].\u201d Id. at 326, 64 S.E.2d at 166.\nNationwide argues that the loss payable clause in this insurance contract is an open loss payable clause. We disagree. The clause stated that the \u201cinsurance covering the interest of the loss payee shall become invalid only because of your conversion or secretion of your covered auto.\u201d This language clearly extends to the loss payee greater coverage than that extended to Dempsey as it sets out only two instances when the loss payee\u2019s insurance coverage will become invalid. For this reason, we hold that the clause is a standard mortgage clause. Other jurisdictions have interpreted similar language used in a loss payable clause as creating a standard mortgage clause. For example, in Pittsburgh Natl. Bank v. Motorists Mut., 621 N.E.2d 875, 876 (Ohio Ct. App. 1993), the Ohio Court of Appeals held that the following loss payable clause constituted a standard mortgage clause:\nLOSS PAYABLE CLAUSE. Loss or damage under this policy shall be paid, as interest may appear, to you and the loss payee [mortgagee] shown in the Declarations. This insurance covering the interest of the loss payee shall not become invalid because of your fraudulent acts or omissions unless the loss results from your conversion, secretion or embezzlement of your covered auto ....\nIn Pittsburgh Natl. Bank, the car owner intentionally destroyed the insured vehicle. In holding that the clause constituted a \u201cstandard mortgage clause\u201d the court distinguished between language in a clause which provides that the coverage for the mortgagee will not be invalidated by any act or neglect of the insured from language in a loss payable clause stating that the proceeds of the policy shall be paid to the mortgagee as his interest may appear.\nThe next question is whether the conditions of the exclusion have been met. The plain language establishes that the auto must either be converted or secreted to invalidate the loss payee\u2019s interest. \u201cConvert\u201d is defined by The American Heritage Dictionary Second College Edition (1991) as \u201c[t]o change from one use, function, or purpose to another; adapt to a new or different purpose.\u201d This same dictionary defines \u201csecrete\u201d as \u201c[t]o conceal in a hiding place.\u201d In this case, the auto was not changed from one purpose to another, nor was it concealed in a hiding place; rather, it was destroyed by fire. Destruction differs from both secretion and conversion in that it is permanent and the loss payee is left without remedy to recover its loss. Moreover, the rules of construction of insurance contracts require that ambiguities be interpreted in favor of the insured and that exclusions be strictly interpreted. N.C. Farm Bureau Mut. Ins. Co., 127 N.C. App. at 446, 491 S.E.2d at 658. Strictly interpreting the definitions of \u201cconversion\u201d and \u201csecretion,\u201d we determine that destruction does not fall within either definition. Accordingly, we hold that the vehicle was not secreted or converted and the trial court properly determined that Nationwide is liable to Regional Acceptance Corporation under the loss payee clause.\nAffirmed.\nChief Judge ARNOLD and GREENE concur.", "type": "majority", "author": "McGEE, Judge." } ], "attorneys": [ "Yates, McLamb & Weyher, L.L.P., by R. Scott Brown, O. Craig Tierney, Jr., and Michael W. Washburn, for plaintiff-appellant.", "Colombo, Kitchin, Johnson, Dunn & Hill, LLP, by William F. Hill and Micah D. Ball, for defendant-appellee." ], "corrections": "", "head_matter": "NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff-Appellant v. JAMES DEMPSEY and REGIONAL ACCEPTANCE CORPORATION, Defendant-Appellees\nNo. COA97-159\n(Filed 17 February 1998)\n1. Insurance \u00a7 474 (NCI4th)\u2014 automobile destroyed by fire\u2014 interest of loss payee \u2014 exclusion for conversion or secretion\nThe trial court properly granted summary judgment for defendant Regional Acceptance Corporation in a declaratory judgment action to determine plaintiff insurer\u2019s liability where plaintiff alleged that Regional held a security interest in the vehicle, that Regional was named as the loss payee on plaintiffs policy, that the insured owner deliberately set the vehicle on fire, and that the intentional burning of the truck constituted a conversion or secretion excluded under the coverage provided to Regional. The policy language \u201cinsurance covering the interest of the loss payee shall become invalid only because of your conversion or secretion of your covered auto\u201d extends greater coverage to the loss payee than the insured and is a standard or union mortgage clause.\n2. Insurance \u00a7 474 (NCI4th)\u2014 automobile \u2014 deliberately burned \u2014 loss payee \u2014 plain language of policy \u2014 exclusion for secretion or conversion \u2014 not applicable\nThe trial court properly determined that plaintiff-Nationwide is liable to the loss payee (Regional Acceptance Corporation) where the insured owner deliberately burned the vehicle. The plain language of the policy issued by plaintiff to the owner established that the auto must be converted or secreted to invalidate the loss payee\u2019s interest and the insured\u2019s automobile was destroyed by fire. Destruction does not fall within the strictly interpreted definitions of conversion and secretion.\nAppeal by plaintiff from order entered 22 November 1996 by Judge Henry V. Barnette, Jr., in Wake County Superior Court. Heard in the Court of Appeals 17 November 1997.\nYates, McLamb & Weyher, L.L.P., by R. Scott Brown, O. Craig Tierney, Jr., and Michael W. Washburn, for plaintiff-appellant.\nColombo, Kitchin, Johnson, Dunn & Hill, LLP, by William F. Hill and Micah D. Ball, for defendant-appellee." }, "file_name": "0641-01", "first_page_order": 677, "last_page_order": 681 }